54. HEFCE allocates additional funds to support
the recruitment and retention of students from under-represented
groups. These funds recognise the additional cost of providing
for such students and offer an incentive for their recruitment.
For 2000-01 £24 million will be allocated to universities
for this purpose. This additional funding represents a supplement
of 5 per cent for each undergraduate entrant from neighbourhoods
with lower than average participation rates. Additional funds
are available for students with disabilities, totalling £7
million in 2000-01. The funding methodology also provides additional
funding for part-time students and full-time mature students,
at a five per cent enhancement to the revenues received by the
university.[53]

55. Higher education institutions which have demonstrated
success in widening access are given priority in the allocation
of additional student numbers by HEFCE. Institutions must provide
evidence of recruitment, progression and achievement rates when
bidding for additional student places. In the most recent round
of bidding for additional places, 17,948 of the 20,743 places
allocated were for bids to widen access.[54]

56. A number of special funding streams from HEFCE
are currently available to support partnerships, innovation and
developmental activity to promote wider access to higher education.[55]
These include a programme to promote regional partnerships between
higher education, schools and community groups to improve progression
to higher education by students from disadvantaged backgrounds;
a programme to improve progression from further education to higher
education for disadvantaged groups; and a fund to improve the
provision for disabled students in higher education. HEFCE also
administers on behalf of the Department for Education and Employment
a summer school programme for students prior to applying for higher
education. In academic year 2000-01 funding available from HEFCE
for programmes to widen access totalled £160 million.

57. HEFCE has recently issued proposals for additional
expenditure to raise the aspirations of students to enter higher
education, encourage institutions to recruit students from a wide
variety of backgrounds and ensure that students have the best
possible chance of succeeding in higher education.

58. Baroness Blackstone, Minister for Higher Education,
argued that it was not necessary to skew higher education funding
to require universities to pursue widening access initiatives.
She told the Sub-committee that it was necessary to provide universities
with the resources required for outreach work and for the additional
costs that there may be for recruiting students who do not come
from family backgrounds where there is a tradition of going into
higher education.[56]
The Minister confirmed that the funds available for widening access
were in addition to the core funding disbursed by HEFCE, and would
not "in any way" reduce the money available for teaching
or research.[57]

59. It has been suggested that the financial incentives
to widen access to higher education do not adequately recognise
the additional costs that institutions incur in meeting the needs
of 'non-traditional' students. A discussion paper presented to
the September 2000 Conference of the Committee of Vice-Chancellors
and Principals (now Universities UK) argued for an increase in
the 'access premium':

"Current Government
access policies are reflected in HEFCE's allocation of most of
its funding identified for improving access by payment to institutions
of a 5 per cent premium within the block grant for young students
from identified areas of low participation. This approach rewards
actual access achievements and leaves discretion over funding
to institutions. SHEFCE (the Scottish Higher Education Funding
Council) supports improved access through selected short-term
projects. It is CVCP policy that access funds should be 'mainstreamed'.
The main issue is whether the arbitrary premium of 5 per cent
for young students from low participation neighbourhoods, together
with payments for mature and part-time students, is sufficient
to meet particular retention needs and to provide a sufficient
incentive to all institutions. It has been suggested to us that
given the level of current staffing ratios, a premium of at least
10 per cent for relevant students would be appropriateparticularly
for those admitted with limited entry qualifications. This is
estimated to cost, on the basis of the current 5 per cent premium,
approximately £25 million per annum".[58]

60. This may not, however, be enough. A radical way
to encourage real change in universities' approach to increasing
the diversity of intakes would be to increase very substantially
the per capita funding for students from relatively disadvantaged
backgrounds. This would capture the attention of higher education
decision makers and encourage them to put social diversity at
the heart of their strategy. Such a move would require careful
study, but we believe that it deserves careful consideration.

61. Data collected by UCAS, and research such as
that undertaken by the Four Counties Group of universities, improves
understanding of the reasons for low levels of participation and
provides a stronger basis for undertaking a further range of initiatives.
We welcome the Government's moves to tackle under-representation
in higher education from inner city areas, particularly through
the Excellence in Cities programme. We recommend that the
Government should consider whether the performance of individual
schools and colleges in supporting wider access to higher education
should be subject to a similar process of performance indicators
and benchmarks as all higher education institutions.

62. There is clearly a place for short-term initiatives.
We recommend that focused schemes similar to the Education
Action Zones recently established by Government, should be set
up for higher education. These would co-ordinate activities of
schools and colleges, the Learning and Skills Councils, the Connexions
Service and other relevant agencies in the zone. Each zone would
have partner higher education institutions, acting on behalf of
the higher education sector as a whole, not just to promote access
to a single institution. Funding such initiatives would provide
incentives for both students and institutions to raise aspirations
and widen access. Such zones would not be established on a permanent
basis, but would receive funding until what can be called the
'culture of non-participation' in higher education in their areas
had been eradicated or at least substantially diminished. As part
of this recommendation, we also suggest that close consideration
should be given to linking such zones to existing Educational
Maintenance Allowance pilot schemes, which would enable outcomes
to be more closely monitored.

63. It has to be asked, however, whether additional
funds for specific, time-limited initiatives, valuable and welcome
as these may be, will always ensure that efforts to enhance access
are seen, not as a short-term response, but as an on-going responsibility.
Furthermore it is important that institutions should not incur
financial and reputational penalties if their retention rates
fall as a result of taking risks in accepting students from backgrounds
hitherto under-represented in higher education. Under proposals
from HEFCE to widen access,[59]
it is proposed that institutions where less than 80 per cent of
the student body is taken from state schools would be eligible
for support from a new £6 million per year funding stream.
Eligible institutions would be expected to demonstrate commitment
from their own funds to the process. We believe that this new
money, paid to those institutions that currently fail to recruit
students from lower socio-economic groups, rewards those who fail
rather than succeed. We prefer such funding to be added to the
participation premium.

64. These considerations lead us to make a number
of linked recommendations. We recommend that:

Immediate consideration should be given to
raising the existing 5 per cent 'participation premium' to at
least 20 per cent.

In reviewing the funding regime for future
years serious consideration should be given to raising the per
capita premium for students from low participation
neighbourhoods by as much as 50 per cent.

Participation premiums should be continued
for each year the student is registered in order to encourage
retention. Part of the premium for the second and subsequent years
of a course should be front-loaded and paid to institutions in
the first year, in order to help resource the additional teaching
and pastoral support which some students from non-traditional
backgrounds are likely to need.

Where appropriate at least some of the money
provided by Government to support programmes that will increase
the proportions of students from social groups IV and V should
be built into funding baselines, with institutional success in
enhancing participation carefully monitored.

More should be done to address under-representation
from areas other than inner cities, including areas of rural deprivation.

HEFCE should encourage research into the so-called
'hot' spots where, despite relatively severe levels of deprivation,
participation rates in higher education are high, to identify
factors which account for success in these areas.

66. Professor Gareth Williams of the Institute of
Education argued that simplifying the funding system would not
in itself alleviate that problem.[62]
He cited the extremely complicated system of student support in
the United States, countered by each university employing advisers
to guide students to the best financial package, taking account
of the loans and grants that are available. He argued that the
most effective way of promoting access to further and higher education
would be to target any additional funds on the relatively small
groups of students and potential students who could be shown to
face particular barriers to pursuing their education. Professor
Williams told the Sub-committee he would be reluctant to see a
significantly greater share of the money available for higher
education being used for general student support, as opposed to
some of the many other urgent needs of the sector. He did not
believe that financial aspects were the central issue in trying
to achieve improved access results.[63]
Professor Maggie Woodrow told the Sub-committee that her research
for the Committee of Vice-Chancellors and Principals[64]
showed that the absence of a maintenance grant for lower income
student groups was a key concern for Vice-Chancellors, members
of staff in universities, schools, parents and indeed students
themselves.[65]

67. Baroness Blackstone agreed that the system of
student finance was complex, but did not agree that it was getting
more complex.[66]
The funding system had to be complex if it were to provide support
for the full range of students' needs. The Minister referred to
the guides produced by the DfEE for students about the financial
support available. The DfEE had recently produced a revised leaflet
which tried to set out the support system in a way that was accessible
to all people.[67]
The Minister argued that the new system of student support had
only recently been put in place for England and Wales, that it
was working, and it was too early to start making fundamental
changes.[68]

68. We agree that the new system of financial
support for students attending university in England and Wales
is not excessively complex. However, it is essential that information
about financial support available to students is readily accessible,
clear, unambiguous and presented in such a way as to encourage
enquiries and applications, and attention needs to be devoted
to ensuring that existing arrangements meet these criteria.

69. As the student body becomes more diverse, different
support schemes will be needed to meet varied financial requirements.
Not all potential applicants seem to realize that fee contributions
are means-tested, and that between 40 and 50 per cent of all students
will not be called upon to make such contributions. The test of
any set of arrangements is the extent to which all students are
able to use the varied sources of support to match their needs.
This should be closely monitored. Aspects which may form part
of this monitoring should include the extent of students' financial
hardship, the amount of paid employment taken up in term-time
and in vacations during a student's higher education, the extent
to which information about fees and support arrangements influences
the propensity to apply, and eligibility for and take-up of each
source of financial support.

70. Whether we like it or not, there is evidence
that students still do not fully comprehend the financial obligations
that the pursuit of higher education will entail. Many are confused
as to whether they will have to pay tuition fees nor what actual
level of debt they will be incurring by the end of their period
of study. This is a period of significant change in the arrangements
for students' financial support. We recommend that the Department
for Education and Employment, working with individual universities,
should monitor closely and report on the operation of the new
financial support arrangements. We are particularly interested
in the possible impact of those arrangements on the number of
applications from potential students with no family tradition
of going to higher education.

71. The repayment of student loans for students domiciled
in England and Wales will begin when the graduate's income exceeds
£10,000. The repayment will be 9 per cent of income above
£10,000 until the loan is repaid. An alternative scheme was
proposed by the Cubie Committee (see Annex 1), which recommended
that contributions to the proposed Graduate Endowment scheme would
begin once the graduate's income exceeded £25,000. The Scottish
Executive chose not to set up an alternative loans scheme to run
alongside the existing student loans company repayment arrangements.
Changes to the existing scheme would be a matter for the Westminster
Parliament. We believe that the income threshold for repayment
of student loans in England and Wales, and also in Scotland and
Northern Ireland, places too great a burden on graduates' income,
and that the income threshold should be raised.